Effective Date

The proposal would be effective with respect to service performed after the date of
enactment.

3. Modification of the Federal Unemployment Tax Act to Exempt Certain Election
Officials and Election Workers

Present Law

The Federal Unemployment Tax Act ("FUTA") generally requires States to cover under
their unemployment compensation laws service performed in the employ of a State or local
government. Only certain enumerated exceptions are allowed.

Description of Proposal

The proposal would exempt from FUTA service performed as an election official or
election worker. This exemption would apply only if the annual wages received by the
individual for such service is less than $1,000. These persons would also be ineligible to claim
unemployment benefits with respect to such wages.

Effective Date

The proposal would be effective with respect to service performed after the date of
enactment.



DESCRIPTION OF PROPOSALS

1. Modification of the Federal Unemployment Tax Act Definition of Employment to
Exclude Service Performed by Persons Committed to Penal Institutions

Present Law

The Federal Unemployment Tax Act ("FUTA") imposes a 6.2-percent gross tax rate on
the first $7,000 of wages paid annually by covered employers to each employee. Generally,
wages are defined to include all remuneration for employment unless specifically exempted
There is no exemption for wages paid to persons committed to penal institutions.

Description of Proposal

The proposal would exempt wages paid to persons committed to penal institutions from
the definition of wages for FUTA tax purposes. These persons would also be ineligible to claim
unemployment benefits with respect to such wages.

Effective Date
The proposal would be effective with respect to service performed after March 26, 1996.

2. Modification of the Federal Unemployment Tax Act to Exempt Service Performed for
Certain Religious Schools

Present Law

The Federal Unemployment Tax Act ("FUTA") requires States to cover under their
unemployment compensation laws certain nonprofit organizations designated under FUTA.
Specifically, FUTA exempts service performed in the employ of: (1) a church or convention or
association of churches, or (2) an organization which is operated primarily for religious purposes
and which is operated. supervised, controlled, or principally supported by a church or convention
or association of churches. Individuals who are in the employ of entities with a religious
orientation which are not affiliated with a particular church, or convention or association of
churches are not exempt

Description of Proposal

The proposal would exempt from FUTA service performed in an elementary or
secondary school which is operated primarily for religious purposes. This exemption would be
available to such schools even though they are not operated, supervised, controlled, or
principally supported by a church or convention or association of churches. Persons performing
such service would also be ineligible to claim unemployment benefits with respect to such wages



DESCRIPTION OF HUMAN
RESOURCES-RELATED TAX PROPOSALS

Scheduled for Markup
Before the
HOUSE COMMITTEE ON WAYS AND MEANS

on June 10, 1997

Prepared by the Staff
of the

JOINT COMMITTEE ON TAXATION

June 10, 1997

JICX-24R-97



CONTENTS

INTRODUCTION .. 0020
DESCRIPTION OF PROPOSALS .........................
1. Modification of the Federal Unemployment Tax Act Definition

of Employment to Exclude Service Performed by Persons

Committed to Penal Institutions .......................

2. Modification of the Federal Unemployment Tax Act to Exempt
Service Performed for Certain Religious Schools ..........

3. Modification of the Federal Unemployment Tax Act to Exempt
Certain Election Officials and Election Workers ..........

is)



INTRODUCTION

The House Committee on Ways and Means has scheduled a markup regarding the budget
reconciliation items of the Human Resources Subcommittee on June 10, 1997. This document,'
prepared by the staff of the Joint Committee on Taxation, provides a description of the tax-
related provisions of the Chairman’s Amendment in the Nature of a substitute regarding the
budget reconciliation Human Resources Subcommittee items.

i ' This document may be cited as-follows: Joint Committee on Taxation, Description of
Human Resources-Related Tax Proposal (JCX-24R-97), June 10, 1997.

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